Times: Hearst 'oversimplifies' law in JOA fight

In a 26-page filing with the state Court of Appeals, lawyers for The Seattle Times yesterday argued The Hearst Corp. "oversimplifies the law and exaggerates the record" in the companies' dispute over the future of Hearst's Seattle Post-Intelligencer.

Hearst and The Times are fighting over whether their joint-operating agreement (JOA) allows The Times to force negotiations that could lead to shutting down the 140-year-old P-I or to breaking up the JOA.

Hearst has said the P-I would not be able to publish outside the agreement.

Under the JOA, The Times prints, distributes and markets both papers, while each maintains its own news and editorial operations.

In April, The Times invoked the JOA's so-called "stop-loss" clause, allowing it to demand negotiations to shut one paper after undergoing three consecutive years of financial losses. Under a JOA-prescribed formula, The Times showed losses for 2000, 2001 and 2002.

Hearst sued to block the negotiations. In September, King County Superior Court Judge Greg Canova, ruling in one part of the suit, decided in Hearst's favor. The Times appealed Canova's ruling in October.

Yesterday's filing responded to appeals briefs submitted Dec. 23 by Hearst and a third-party intervenor in the case, the Committee for a Two-Newspaper Town.

A Hearst spokesman said yesterday the New York-based media company's position "remains unchanged." Hearst has called Canova's ruling "reasonable" and said it plans to continue to publish the P-I under the JOA.

In their brief, Times lawyers challenged Hearst's claim that the JOA had no financial impact on The Seattle Times Co.'s ability to keep operating its flagship paper.

"The Times is not, as both Hearst and the Committee seem to assume, a charitable organization that should (or can) be content with break-even results," the brief said.

Without a suitable return, the lawyers said, "the time may come when its owners exert irresistible pressure to sell the paper."

Currently, 50.5 percent of the voting stock of The Seattle Times Co. is owned by the Blethen family, and 49.5 percent is owned by Knight Ridder, a large media chain based in San Jose, Calif.

The Times brief said Hearst, in its arguments to Canova and the Appeals Court, had oversimplified a landmark, 1990 state-court case, Berg v. Hudesman, which permits courts to take into account outside evidence in contract disputes.

Hearst cited that case to argue the JOA's "force majeure" clause invalidated Times' claims that newspaper strike-related losses in 2000 and 2001 could be applied to the stop-loss provision. The "force majeure" clause exempts the contracted parties from liability resulting from events outside their control.

The Times brief said later rulings modified Berg's application to specific contract language and would allow the 2000 and 2001 losses under the JOA terms.

In any event, The Times said, there was "ample and persuasive" outside evidence to justify the loss claims.

The Times also said Hearst had disregarded evidence that was contrary to its position and misstated The Times' arguments. Yesterday's brief also said there was "no justification" for the argument by The Committee for a Two-Newspaper Town that exercising the stop-loss provision violated public policy under state law.

Oral arguments are scheduled before a three-judge Appeals Court panel Jan 21.

Bill Richards is a freelance writer hired on a special contract by The Seattle Times to cover events involving the joint-operating agreement with the Seattle Post-Intelligencer. He can be reached at brichards@seattletimes.com.